Mr. Meni Morim reports
LIFEIST REPORTS FOURTH QUARTER 2022 FINANCIAL RESULTS
Lifeist Wellness Inc. has released its financial results for the three and 12 months ended Nov. 30, 2022, compared with the same period last year.
Fourth quarter 2022 highlights:
Net revenue from continued operations increased 4.6 per cent to $6.2-million in fourth quarter 2022 compared with $6.0-million in Q4 2021, reflecting the decision to significantly curtail CannMart Inc.'s licensing of the Phyto brand in August, 2022, in favour of higher-margin in-house Roilty products. In Q4 2021, sales of Phyto brand products represented approximately $4.9-million in revenue at low margins.
Gross profit before inventory adjustment increased 212 per cent to a record $1.8-million in Q4 2022, representing gross margin of 29 per cent, compared with $578,000, or 10-per-cent gross margin, in Q4 2021. Q4 2022 gross profit was the highest quarterly gross profit in the company's history.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) loss was $4.4-million in Q4 2022 compared with $4.8-million in Q4 2021. The $400,000 improvement was due to higher gross profit and lower operating costs, which more than offset a $1.4-million inventory adjustment.
Second half 2022 highlights:
Net revenue from continued operations increased 15.1 per cent to $13.1-million in H2 2022 compared with $11.4-million in H2 2021.
Gross profit before inventory adjustment increased 78 per cent to $3.2-million in H2 2022 compared with $1.8-million in H2 2021, with margins expanding from 16 per cent to 24 per cent.
Adjusted EBITDA loss was $5.5-million in H2 2022 compared with $9.8-million in H2 2021. The $4.3-million improvement was due to higher gross profit and significantly lower operating costs.
Full-year 2022 highlights:
Net revenue from continued operations increased 4.4 per cent to $22.1-million in 2022 compared with $21.1-million in 2021.
Gross profit before inventory adjustment increased 139 per cent to $4.7-million in 2022 compared with $2.0-million in 2021, with margins expanding from 9 per cent to 21 per cent.
Adjusted EBITDA loss was $13.7-million in 2022 compared with $21.9-million in 2021. The $8.2-million improvement was due to higher gross profit and significantly lower operating costs.
Its working capital position was $7.4-million at year-end.
"The wellness-focused Lifeist has made great progress in our efforts to expand profit margins and establish a solid foundation for profitable growth," said Meni Morim, chief executive officer of Lifeist. "We have strategically divested, discontinued or de-emphasized components of our business that were dragging our financials, focusing instead on higher-margin, higher-growth opportunities, including our nutraceutical business and our in-house concentrates brand Roilty. The results are already evident, and as we continue to scale these businesses, we should see further margin expansion, both gross margin and operating margin, ultimately leading to profitability and cash generation.
"Our Mikra [Cellular Sciences Inc.] division is rapidly emerging as Lifeist's another major driver of growth and valuation," continued Mr. Morim. "Mikra is expanding its portfolio to include new products including those in a second category: health food and snacks. It is also significantly broadening its distribution network, including launching on Amazon this week, and plans to be in bricks and mortar GNC stores across America over the coming months. The expanded product offering and distribution channels should enable Mikra to accelerate its growth and contribute to Lifeist's profitability and cash generation at scale.
"Lifeist's other major growth engine -- CannMart -- continues to solidify its position as one of Canada's largest provincial and retail recreational cannabis distribution networks and to do so with significantly improved financial performance," added Mr. Morim. "CannMart has successfully transitioned away from its Phyto licensing arrangement with Adastra in favour of its award-winning in-house concentrates brand Roilty, and the result is achieving the highest gross margin ever of $1.7-million in Q4 2022 (28-per-cent gross margin). We accomplished this while also reducing overhead, thus improving the overall bottom line."
Cannabis: CannMart and CannMart Labs Inc.:
Lifeist's cannabis business made positive strides on its path to profitability in Q4 2022, highlighted by expanding gross profit and a narrowing of adjusted EBITDA losses for H2 2022. The improved profitability is being driven by the growth of the higher-margin in-house brand Roilty and the termination of the lower-margin licensing of the Phyto brand from Adastra Holdings Inc.
Recreational cannabis revenue grew 5.2 per cent to $4.1-million in Q4 2022 as CannMart was able to more than offset the planned reduction in sales of Phyto-branded products with better-than-expected sales of Roilty products. Roilty brand products represented $3.8-million in Q4 2022 compared with $400,000 in Q4 2021 whereas Phyto brand products represented just $1.0-million in revenue in Q4 2022 compared with over $4.9-million in Q4 2021. Roilty growth was driven by increased distribution and retail sell-through of an expanding portfolio of products in the premium and mid-range concentrates categories in Canada's largest provincial markets.
During Q4 2022, CannMart brought to market two additional product categories, including shatter and live resin vapes, both produced in-house at Labs' state-of-the-art BHO extraction facility. Labs' fourth product category, THCa diamonds, is in the research and development phase, with plans to launch in spring 2023.
CannMart also entered into a distribution agreement with Hamilton Devices, one of the leading U.S. manufacturers and suppliers of vape hardware, becoming Canada's first distributor of Hamilton Devices' complete portfolio of innovative consumer-facing, extract-focused vape hardware products across Canada through October, 2024, with an initial six-month exclusivity.
In March, 2023, Lifeist completed the final base purchase price share issuance related to the CannMart Labs acquisition.
Mikra's Q4 2022 financial performance demonstrates the beginning of revenue starting to scale after resolving supply chain hurdles last spring and summer. Leadership has spent the past several months expanding the product portfolio and building distribution channels, which are expected to result in accelerated revenue growth and profitability in the coming periods.
Mikra reported revenue of $610,000 in Q4 2022 compared with no revenue in Q4 2021 and a 65-per-cent increase over third quarter 2022. Results were driven by sales of flagship product CELLF, which shipped 5,073 orders to customers in the quarter.
Adjusted EBITDA losses in Q4 2022 were $699,000 compared with $506,000 in Q4 2021. The increased losses were due to investments in new product innovation such as the introduction of Rescue in December, 2022, and the new version of CELLF in February, 2023, as well as the development of new distribution channels such as Amazon and GNC stores. The company anticipates that these investments will set Mikra up for accelerated growth and profitability in the coming quarters.
Mikra continues to progress on track toward an initial purchase order from GNC Holdings LLC pursuant to the distribution agreement that the two parties signed in January, 2023. GNC has agreed to be Mikra's exclusive distribution partner for CELLF and its future derivates in the United States in GNC's retail stores and on GNC's channel on Amazon
Mikra launched sales of a new and improved formulation of its flagship product CELLF in February, 2023. The key improvements to CELLF include significantly better taste, one-handed accessible sachet design, environmentally friendly exterior packaging, and now dairy-free and vegan. Early data indicate that the new formulation has led to the return of customers who had previously churned.
Mikra launched its second product in December, 2022, Rescue, a 100-per-cent naturally derived and rapid-acting digestive aid formulated to relieve negative gastrointestinal symptoms due to suspect food and drink choices. Each high-impact dose contains pure, fine-milled activated coconut charcoal powder made from superheated coconut shells, which act to trap the body's toxins and chemicals. At a price point of $18 (U.S.), Rescue is expected to be a strong performer on Amazon.
Mikra will also be adding a line of health food and snack products, with production starting in late spring 2023 with products available for purchase by consumers in the second half of the year. The first foray into this category will be a certified gluten-free, vegan, functional nutrition bar targeting intermittent fasters in need of a low glycemic index meal to break their fast and health-conscious individuals looking for a clean, substantial snack to maintain energy between meals.
Earlier this week, Mikra began Amazon sales of CELLF in the United States and of Rescue in both the United States and Canada. Selling on the leading e-commerce site marks a significant advancement in distribution for Mikra, which until now has sold its products exclusively through its direct-to-consumer website.
Australian Vaporizers Pty. Ltd.:
Australian Vaporizers revenue decreased by 20 per cent to $1.5-million in Q4 2022 compared with Q4 2021, in part due to being more aggressive on price as part of the recovery strategy after the floods that significantly impacted the business in spring 2022. Recent customer activity is resuming toward historical levels and are on track to reach the preflood monthly average levels in first quarter 2023, validating the strong product offering and loyal customer base of the business.
Adjusted EBITDA losses in Q4 2022 were $142,000 compared with an adjusted EBITDA profit of $236,000 in Q4 2021. The reduction is largely due to the lower revenue and an additional inventory writedown of $200,000 at year-end.
Fourth quarter 2022
Net revenue from continued operations increased 4.6 per cent to $6.2-million in Q4 2022 compared with $6.0-million in Q4 2021. The increase was driven by a $200,000, or 5.1-per-cent, increase in Canadian cannabis revenue and a $600,000 contribution from Mikra, partially offset by a $400,000 decrease at Aus Vapes, which continues to recover from the spring 2022 floods, and $200,000 from the planned wind-down of hardware sales in Europe through Lifeist Bahamas. A significant contributor to the quarter was the growth of Roilty brand sales ($3.8-million of revenue in Q4 2022 versus $400,000 in Q4 2021), which more than offset the planned reduction of Phyto brand products ($1.0-million in Q4 2022 versus $4.9-million in Q4 2021) with higher-margin revenue.
Gross profit before inventory adjustment increased 211 per cent to $1.8-million compared with $578,000 in Q4 2021, with margins expanding from 10 per cent to 28 per cent. The gross profit in Q4 2022 was the highest quarter in the company's history, highlighting an improving trend over the last several quarters.
Adjusted EBITDA loss was $4.4-million in Q4 2022 compared with $4.8-million in Q4 2021. Net loss was $8.1-million, or two cents per diluted share, in Q4 2022 compared with a loss of $3.9-million, or one cent per share, in Q4 2021. Q4 2022 included a $2.5-million impairment loss on intangibles compared with Q4 2021, which included a $1.8-million gain on change in the fair value of receivables.
Second half 2022
Net revenue from continuing operations increased 15.2 per cent to $13.1-million in H2 2022 compared with $11.3-million in H2 2021. Gross profit before inventory adjustment increased 112 per cent to $3.2-million compared with $1.5-million in H2 2021, with margins expanding from 13 per cent to 24 per cent.
Adjusted EBITDA loss was $5.5-million in H2 2022, an improvement of $4.3-million compared with a loss of $9.9-million in H2 2021. Net loss was $10.1-million, or two cents per diluted share, in H2 2022 compared with a loss of $9.9-million, or three cents per share, in H2 2021. H2 2022 included a $2.5-million impairment loss on intangibles compared with H2 2021, which included a $1.8-million gain on change in the fair value of receivables.
Net revenue from continued increased 4.4 per cent to $22.1-million in 2022 compared with $21.1-million in 2021. Gross profit before inventory adjustment increased 133.5 per cent to $4.6-million compared with $2.0-million in 2021, with margins expanding from 9 per cent to 21 per cent.
Adjusted EBITDA loss was $13.7-million in 2022, an improvement of $8.2-million compared with a loss of $21.9-million in 2021. Net loss was $15.4-million, or three cents per diluted share, in 2022 compared with a loss of $23.8-million, or six cents per share, in 2021. Two thousand twenty-two included a $2.5-million impairment loss on intangibles compared with 2021, which included a $1.8-million gain on change in the fair value of receivables.
Balance sheet and cash flow
Cash and cash equivalents were $3.8-million at Nov. 30, 2022, compared with $12.7-million at Nov. 30, 2021.
Inventories were $4.5-million at Nov. 30, 2022, compared with $5.4-million at Nov. 30, 2021, mainly due to the removal of Phyto inventory by CannMart, offset by an increase in Mikra inventory.
Net cash used in operations was $15.3-million in fiscal 2022 compared with $18.3-million last year, due in part to investments in CannMart and Mikra. Cash provided by operations was $162,000 in Q4 2022, compared with cash used in operations of $5.3-million in Q4 2021 and $3.2-million in Q3 2022. Operating cash flow is expected to improve over the coming quarters due to profitable growth in the overall business.
The company's complete financial statements and management's discussion and analysis for fiscal 2022 are available on Lifeist's website and SEDAR.
About Lifeist Wellness Inc.
Sitting at the forefront of the postpandemic wellness revolution, Lifeist leverages advancements in science and technology to build breakthrough companies that transform human wellness. Portfolio business units include: CannMart, which operates a business-to-business wholesale distribution business facilitating recreational cannabis sales to Canadian provincial government control boards; CannMart Labs, a BHO extraction facility for the production of high-margin cannabis 2.0 products; Australian Vapes, Australia's largest on-line retailer of vaporizers and accessories; and Mikra, a bioscience and consumer wellness company seeking to develop innovative therapies for cellular health.
We seek Safe Harbor.
© 2023 Canjex Publishing Ltd. All rights reserved.